10-year bond yields cross 8%, highest in over 3 years

Yield on the 10-year government bonds rose above the 8 percent mark for the first time since November 2014 on Friday, two days after the Monetary Policy Committee raised key interest rates and change liquidity coverage norms. The same had closed at 7.993 percent on Thursday. Bond yields and prices move in opposite directions.

The sovereign 10-year bond yield has risen over 60 basis points since April and is near a three-year high due to a lack of investors.

Similarly, top-rated corporates, including National Bank for Agriculture and Rural Development (NABARD), Small Industries Development Bank of India (SIDBI) and National Housing Bank (NHB) have deferred their bond issuance plans due to a lack of buyers.

To top this, foreign holders have sold a net $4.3 billion of Indian debt so far this year as investors have grown wary of emerging economies facing twin fiscal and current account deficits and higher inflation that could pose overheating risks.

The stock market has held up so far, but some analysts caution that concerns over a loosening of fiscal discipline ahead of the election could trigger equity outflows as well.